$700 billion bailout package

[Broken Arrow]

Eloquent, noppenbd! Well said.

[jIM_Ohio]

The bailout package is meant to break a cycle of confidence which is spiraling. The banks have a lot of debt on their books, which is nothing new. The problem is that their assets have become hard to value. Currently, no one is buying mortgage backed securities, which means their value is hard to determine. When the bank's assets fall this much they are forced to curtail lending. This leads to a curtailing of spending (since capitalism requires easy access to capital, which often means lending). When spending slows, jobs get lost and consumers can't pay their mortgages. This reduces the banks assets even more (foreclosures). So you can see how this cycle could continue downward. This cycle is all being caused by the illiquidity of the bank's assets. By creating a "buyer of last resort" the bailout will instantly create the liquidity that the banks need by establishing a market for their mortgage backed securities. In the long run these securities are probably worth much more than the US government will pay for them tomorrow. So it is not just a gift of money. In a way it is a fire sale on debt that will end up being repaid for the most part. When the S&L crisis occurred a similar buyout occurred and the government ended up making money on the whole deal. I think it needs to be done.

Well written.

The last sentence suggests that even if we create legislation to stop problems from happening, the banks greed will find a way to cause another problem in about 30 years anyway.

[sweeps]

Breaking news: It's a done deal, folks.

President Bush signs historic financial rescue plan into law - Oct. 3, 2008

[tripods68]

The bailout package is meant to break a cycle of confidence which is spiraling. The banks have a lot of debt on their books, which is nothing new. The problem is that their assets have become hard to value. Currently, no one is buying mortgage backed securities, which means their value is hard to determine. When the bank's assets fall this much they are forced to curtail lending. This leads to a curtailing of spending (since capitalism requires easy access to capital, which often means lending). When spending slows, jobs get lost and consumers can't pay their mortgages. This reduces the banks assets even more (foreclosures). So you can see how this cycle could continue downward. This cycle is all being caused by the illiquidity of the bank's assets. By creating a "buyer of last resort" the bailout will instantly create the liquidity that the banks need by establishing a market for their mortgage backed securities. In the long run these securities are probably worth much more than the US government will pay for them tomorrow. So it is not just a gift of money. In a way it is a fire sale on debt that will end up being repaid for the most part. When the S&L crisis occurred a similar buyout occurred and the government ended up making money on the whole deal. I think it needs to be done.

Noppenbd,

Well said.

The only problem I have with this bailout is other "earmarked" that was attached to this Bill. It's no longer $700 Billion is actually $850 Billion if you add all the "extras" to entice other members to vote for the bail out package. I also don't get why would they include, car loan and credit card losses as part of the package. It seems to me, the bailout package is doing more to cater WallStreet than to mainstreet. This troubles me more than the original idea for the government to take over all subprime loan losses which provide extra liquidity to the overall market.

[CSimms]

Yes, there was a lot of pork added to the rescue plan (I can't stand to use bailout at this point) to the tune of $150B to satisfy the individual political agendas of those signing the bill. A testament to the fact that most of our governing body in Washington has no clue what is happening in the real world. I am somewhat cynical to the whole situation and would just assume let capitalism run its course. I mean, that is the foundation of our economy, correct? Through all this, the next time something like this happens (and don't worry, it will) does this mean socialism will take control, again? Where is the line drawn in the sand to dictate when the government can step in and when such an action would impede on capitalism?

[boosami]

These banks get $25B each from the bailout money:
- Citigroup
- Wells Fargo
- JPMorgan Chase
- Bank of America

Another $26B is being split up to Goldman Sachs, Morgan Stanley, State Street Bank, and Bank of New York.

Good to see those more-responsible-banks with the largest sums going to them.

[disneysteve]

- Bank of America

I'd love to buy into BAC today. Just not sure I can shift the money around fast enough to put in the buy before the price rockets up. I'm betting they'll be up at least $5/share today.

[boosami]

FDIC just raised deposit insurance limits for non-interest-bearing accounts and previous senior unsecured debt (bank-to-bank lending) to guarantee an unlimited amount of funds! Doesn't really affect us savers, but great news for struggling and worried small business owners.

FDIC: Press Releases - PR-100-2008 10/14/2008

[disneysteve]

I'd love to buy into BAC today. Just not sure I can shift the money around fast enough to put in the buy before the price rockets up. I'm betting they'll be up at least $5/share today.

I missed it. It's already up $3.75 at the open.

[Broken Arrow]

Yeah... the stocks had already gone up right now in pre-market trading. If we were to buy in now, it's already too late.... The stocks mentioned have gone up huge too. Literally 13% to 18% overnight. And that's on top of yesterday's rally!

I think the best time to get in was last Friday....

[snafu]

The uptick is the result of large institutional buyers whose business it is to manage pension portfolios and mutual funds. Those people's very livelihood depends on buying and selling bonds and equities.

Individuals might not make 18% in one day but with a well thought out and researched plan, there is money to be made over the long term. Individual traders who have the time, knowledge, patience and RISK tolerance to sit at their computers from 6 am - 2 pm are discoverings bargains galore.

[Broken Arrow]

Individuals might not make 18% in one day but with a well thought out and researched plan, there is money to be made over the long term. Individual traders who have the time, knowledge, patience and RISK tolerance to sit at their computers from 6 am - 2 pm are discoverings bargains galore.

The scary thing is, the volatility recently is so high, practically anyone can get up to 30% gain in 24 hours. Of course, that also includes the risk of losing up to 30% if we are not careful.

In fact, the most extreme I've seen is +80% to -90% in a single day. 80% gain is crazy enough, but can you imagine getting stuck with a 90% loss? It's like, you might as well give up because that money is gone for good. Very scary indeed.

But anyway, I agree with you.